We have identified a protease in the E. coli outer membrane which cleaves nitrate reductase, an enzyme in the cytoplasmic membrane. When nitrate reductase is cleaved, it is released from the membrane in an active form. We have used solubilization of nitrate reductase as an assay for this protease. The protease is enriched in the portion of the outer membrane which is somehow attached to the cytoplasmic membrane. The protease inhibitor which inhibits this enzyme has been shown to prevent the biosynthesis of the major outer membrane proteins when added to growing cells. Under the same conditions, this inhibitor has little effect on the biosynthesis of cytoplasmic membrane proteins. We propose that this enzyme is located on the outer membrane at fused regions (where inner and outer membrane are attached) and that this protease is involved in the processing of secreted proteins. Other studies involving in vivo turnover of nitrate reductase indicate that degradation of the enzyme, followed by its release from the membrane, occurs only when the conformation of the nitrate reductase protein within the membrane is changed. Inactivation of the enzyme due to lack of molybdenum or a modification which occurs in the presence of oxygen do not lead to degradation.